CEO outlines new vision for Microsoft

  • Bloomberg News
  • Thursday, July 10, 2014 1:50pm
  • Business

SEATTLE — Microsoft Corp.’s Satya Nadella unveiled his first vision statement as chief executive officer, saying that more engineering and organizational changes are needed as he attempts to turn around the software maker.

“We’ve got to back it up with products people love and that’s what we’re galvanizing to do,” Nadella said.

The CEO didn’t address the prospect of job cuts, yet people familiar with the company’s plans said reductions will probably happen. Microsoft, based in Redmond, is shifting its focus from the devices and services strategy that former CEO Steve Ballmer reorganized the company around last July and is homing in more on productivity, mobile and cloud, Nadella wrote in a memo Thursday that was distributed to employees and posted on the company’s website.

“Over the course of July, the senior leadership team and I will share more on the engineering and organization changes we believe are needed,” Nadella wrote. “Nothing is off the table in how we think about shifting our culture.”

The memo is Nadella’s most comprehensive statement about Microsoft’s direction since he was appointed CEO in February. Since then, he has made several appearances at company and technology events to discuss the priorities of mobile and cloud products, as he works to shift Microsoft away from its longtime core business of software for personal computers. Nadella has signaled a desire to produce software for rival operating systems like Apple’s iOS and Google’s Android and has shuffled management in areas like marketing, business development and the Xbox game console.

“We believe management is effectively laying the groundwork for a healthy fiscal year 2015,” Daniel Ives, an analyst at FBR Capital Markets, wrote in a note Thursday about Nadella’s memo.

When Microsoft agreed to acquire Nokia’s handset business in September, the software maker pledged $600 million in annual cost savings for 18 months after the deal closes. Meeting that commitment will probably involve job cuts in areas where the two companies overlap, said the people familiar with Nadella’s thinking.

Other job cuts may result from changes Nadella is making to the engineering organization, said the people. Engineering teams have traditionally been split between program managers, developers and testers. Yet with new cloud methods of building software, it often makes sense to have the developers test and fix bugs instead of a separate team of testers, Nadella said. He is also elevating designers and data scientists to be on par with the engineering team on each product, he said.

Nadella declined to say whether the changes will result in job cuts and said he would provide more details on the implications of his memo when Microsoft reports fiscal fourth-quarter earnings July 22. He said some of the changes have already been under way in several groups.

Nadella also defined productivity as corporate and consumer activities. He identified Cortana, Microsoft’s voice-controlled personal assistant, as “perhaps the biggest innovation in productivity we’ve done.”

The CEO said he sees the company’s operating systems as a cloud OS comprised of Azure, its software for hosting and running apps in the cloud; its Windows software for PCs; as well as Windows for devices and Microsoft’s own hardware. He pledged to modernize the company’s engineering processes to be faster and rely more on data, as well as making them better at predicting what customers want.

Nadella also stated his commitment to Xbox, even as he listed it as something outside the company’s core.

“It’s critical to define the core, but it’s important to make smart choices on other businesses in which we can have fundamental impact and success,” Nadella wrote. “The single biggest digital life category, measured in both time and money spent, in a mobile-first world is gaming.”

Microsoft isn’t interested in building hardware to become an equipment maker, Nadella said. Instead, the company will focus on areas where it can define new categories, he said.

In some ways the focus on productivity and platforms harkens back to where Microsoft was in the 1990s when it had two divisions: platforms and applications. The focus on mobile and cloud makes that mission bigger and gives Microsoft more potential to stake out a key role in customers’ lives, Nadella said.

“That core sensibility we have has to be redefined in sensible ways,” he said. “It’s a much more bold ambition on our core than we ever had.”

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Lily Lamoureux stacks Weebly Funko toys in preparation for Funko Friday at Funko Field in Everett on July 12, 2019.  Kevin Clark / The Herald)
Everett-based Funko ousts its CEO after 14 months

The company, known for its toy figures based on pop culture, named Michael Lunsford as its interim CEO.

The livery on a Boeing plane. (Christopher Pike / Bloomberg)
Former Lockheed Martin CFO joins Boeing as top financial officer

Boeing’s Chief Financial Officer is being replaced by a former CFO at… Continue reading

Izaac Escalante-Alvarez unpacks a new milling machine at the new Boeing machinists union’s apprentice training center on Friday, June 6, 2025 in Everett, Washington. (Olivia Vanni / The Herald)
Boeing Machinists union training center opens in Everett

The new center aims to give workers an inside track at Boeing jobs.

Some SnoCo stores see shortages after cyberattack on grocery supplier

Some stores, such as Whole Foods and US Foods CHEF’STORE, informed customers that some items may be temporarily unavailable.

People take photos and videos as the first Frontier Arlines flight arrives at Paine Field Airport under a water cannon salute on Monday, June 2, 2025 in Everett, Washington. (Olivia Vanni / The Herald)
Water cannons salute Frontier on its first day at Paine Field

Frontier Airlines joins Alaska Airlines in offering service Snohomish County passengers.

Amit B. Singh, president of Edmonds Community College. 201008
Edmonds College and schools continue diversity programs

Educational diversity programs are alive and well in Snohomish County.

A standard jet fuel, left, burns with extensive smoke output while a 50 percent SAF drop-in jet fuel, right, puts off less smoke during a demonstration of the difference in fuel emissions on Tuesday, March 28, 2023 in Everett, Washington. (Olivia Vanni / The Herald)
Sustainable aviation fuel center gets funding boost

A planned research and development center focused on sustainable aviation… Continue reading

Helion's 6th fusion prototype, Trenta, on display on Tuesday, July 9, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
Helion celebrates smoother path to fusion energy site approval

Helion CEO applauds legislation signed by Gov. Bob Ferguson expected to streamline site selection process.

Pharmacist John Sontra and other employees work on calling customers to get their prescriptions transferred to other stores from the Bartell Drugs Pharmacy on Hoyt Avenue on Wednesday, July 2, 2025 in Everett, Washington. (Olivia Vanni / The Herald)
Bartell Drugs location shutters doors in Everett

John Sontra, a pharmacist at the Hoyt Avenue address for 46 years, said Monday’s closure was emotional.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.